UK – A new consultation document on the actuarial profession in the UK has questioned the accountability of actuaries in the wake of the Equitable Life scandal.
“Are actuaries sufficiently accountable for their actions?” asks report author Derek Morris, who was appointed to investigate the profession by the government in March after Lord Penrose’s report into the Equitable Life collapse.
Penrose had argued that actuaries had taken on responsibilities outside their professional discipline.
The Morris consultation asks: “To whom should actuaries be primarily accountable – to their clients or employers, to pension fund trustees or sponsors, or to a broader public interest, which encompasses the strength and stability of the insurance and pension sectors and the interests of those consumers involved?”
Morris also says: “Are actuaries sufficiently liable for their actions? If actuaries provide poor advice, to whom should they pay compensation?”
The 49-page paper points out the “extremely important role” played by pension scheme actuaries – advising trustees on scheme design, funding, investment strategy and risk.
“This raises issues about the extent to which trustees have the expertise or the information to challenge the advice given by the scheme actuary and whether there is an appropriate degree of openness and scrutiny of the work of scheme actuaries.”
It put the question as to whether scheme actuaries are effectively making policy decisions “by default” – and asks the question that the scheme actuary service could be provided by other professions.
The Morris report has also raised questioned about the future role, if any, of the Government Actuary’s Department. The GAD had been criticised in the Penrose Report for its role in the Equitable Life affair.
Francis Fernandes, partner, Lane Clark & Peacock said: "The Morris consultation will be good opportunity to see how the actuarial profession is viewed by the public.
"From now on, it is not good enough to simply say we are acting according to high standards. Those who are ultimately affected by our advice should be able to look into our mathematical world and decide that for themselves."
The deadline for responses to the consultation paper is September 10 2004, with the final report due by spring 2005.